It is no secret that the value you create for your customers with your products and services will either make or break your business.
But did you know that “universal building blocks” of value exist and you can leverage these to create, bolster, and propel your business forward?
In the August 2018 issue of Rotman Management, Eric Almquist and Jamie Cleghorn presented “The Elements of Value” models for consumers and for business to business. These models are based on their extensive research and fit nicely into the Maslow Hierarchy of Needs framework. This post provides the basics for their Business to Consumer model.
The Consumer Value Pyramid
According to the authors and their research, there are 30 fundamental building blocks of value in the business to consumer model. These 30 elements organize nicely into a four level Hierarchy of Needs pyramid. They are shown in the diagram below and, for the most part, the model is self explanatory.
This week’s book summary is The Four by Scott Galloway.
Although I may not completely agree with Galloway’s perspective in this book, he provides a combination of solid research and cynical humor to paint a picture of how a few companies are reinventing the world as we know it. His detailed study of Amazon, Apple, Facebook, and Google show how these massive companies were formed, the market spaces they created, and the incredible societal and business impacts they have made and are making.
My takeaway from this book is Galloway’s “T Algorithm” which is his definition of the factors needed for a business to rise up and compete against The Four. The eight factors are:
Microsoft, Amazon, Apple and Facebook get much of their value through the use of Multisided Platforms (MSPs).
MIT Sloan define a multisided platform as “technologies, products or services that create value primarily by enabling direct interactions between two or more customer or participant groups.” For example:
- Apple connects app developers with iPhone users who have a need for the functionality that the app provides.
- LinkedIn connects professionals, recruiters, and advertisers.
- Microsoft uses Windows to connect users, third party app developers, and third party hardware manufacturers
- Amazon and Alibaba connect sellers of products with a vast set of users that want to buy products.
- AirBnB connects building owners with people needing to rent space.
- Uber and Lyft connect drivers and passengers.
- American Express, Visa, Paypal, and Square connect merchants to consumers.
MSPs are a very valuable and viable business model that creates value by reducing search or transaction costs for all participants.
Is your business leaving money on the table by not leveraging an MSP approach? Or, worse yet, are you leaving your business vulnerable to competition who have determined a unique MSP offering that threatens your existence?
What can you do to leverage the MSP strategy and how can you implement it in your business?
If you do not differentiate your business from your competitors, you are just another commodity! Being a commodity means that your products are no better than anyone else’s. This drives down your prices, erases profits, and eventually kills your business.
I wrote about what causes commoditization and how to avoid it in a post called Why Does Your Business Exist and Why Should We Care.
In this post Apple entered the MP3 market as a late comer. They were not the “first mover” and the market space already had a large number of competitors who competed on price. The market space was already commoditized.
Apple knew this but they understood that they could still dominate the space by clearly differentiating themselves from their competitors. They identified their key differentiators, measured themselves against their competitors, and realized that they were head and shoulders above the others. They entered the market and still dominate it today!
Recently I read The Alliance: Managing Talent in the Networked Age. Although I think the authors took a few too many chapters to explain their thoughts, I really did like the concept they titled “Tours of Duty.” A Tour of Duty is simply a formal or informal arrangement between an employee and employer. This arrangement defines the parameters of a work assignment that the employee will take on that will both develop their career and advance the company at the same time.
This is not a new concept by any means. It has existed in the military world for eons and I was introduced to it when I started in business back in the early 90’s. Essentially, it is an assignment with a defined term, expected personal development outcomes, and expected business outcomes. The employee is motivated to successfully execute the Tour of Duty so they can be promoted or get moved to a choice assignment, etc. (as defined by the agreement with their employer).. The business benefits because the employee is completely engaged in the process and is typically adding significant value to the business.
The authors of The Alliance specify three types of Tours of Duty